Should companies be allowed to discriminate in favour of female and ethnic minority candidates? Yesterday, equality minister Harriet Harman said that they should, and that the result would be a more diverse workforce.

And she doesn't have to look far for evidence that something needs to be done: when Labour MP Dawn Butler won her Brent South seat in 2005, she became only the third black woman ever to sit in the House of Commons - particularly depressing when you consider that the first, Diane Abbott, won her seat more than 20 years ago. It was sad, then, but predictable, that Butler would encounter racist attitudes. One one occasion, the Tory MP David Heathcote-Amory demanded to know what Butler was doing in the members' section of the terrace, and asked if she was an MP. "I said, 'Yes, I am actually. Are you?' He turned round and said, 'They're letting anybody in nowadays.'" Heathcote-Amory has subsequently denied that his remark was racist - he says the only reason he challenged Butler was because he didn't recognise her; she had only recently arrived in the Commons.

On another occasion, Butler was in a members' lift when other occupants started complaining loudly, saying catering and cleaning staff shouldn't be in there, clearly referring to her. On yet another, a security guard at the Commons stopped Butler, who was with a white female MP, and asked to see her pass. She asked him why he didn't want to see both passes. "I made the point to him that he shouldn't make assumptions. It's not me saying, 'Don't you know who I am?' It's, 'Treat me the same as you would treat anybody else.' Some things you just dismiss; you think, 'This is just pathetic,' and laugh it off. The first time I became aware of it, I asked Diane Abbott, 'Does this really happen?' She said, 'You'd think they'd have learned after 20 years.'"

Butler says she has always chosen "difficult professions". She once worked in computer programming, which "was very white and male-dominated", she says. However she left after being sexually harassed. "Even though I complained, it wasn't taken seriously." Butler later became a trade union official - another white, male-dominated profession. Were people surprised to see a young black woman there? "I think some were. If I was going to meetings, some people would assume I was a secretary. That was the first time I would go to meetings and say something, and it didn't get taken on board. And then a bloke would say it and everyone would go, 'Good idea.' The first time it happens, you're so stunned you can't even correct it." She laughs. "The difference is, the trade unions are willing to change."

It only takes a glance at the country's top jobs to recognise that women from ethnic minorities are conspicuous by their absence. Combating the "old-boy network", which discriminates particularly strongly against ethnic minority women, is one of Harman's priorities in the new measures she has just outlined. As well as just two black women who are currently MPs, fewer than 1% of the directors of FTSE 100 companies are women of non-European descent and there is only one female high court judge from an ethnic minority.

"There is no lack of talent or ambition among ethnic minority women in the UK," says Zohra Moosa, senior policy adviser on race and gender for the Fawcett Society, which campaigns on equality issues. "In fact, ethnic minority women bring distinct experiences, skills and competencies to organisations that are otherwise dominated by white, middle-class men. Not making the most of their skills means missing out on a huge pool of specialist talent and, ultimately, that is bad for business."

Last month, the Fawcett Society published a report, Routes to Power, which found that throughout all levels of employment, ethnic minority women are under-represented. Those between the ages of 16 and 24 are twice as likely to be unemployed as their white female peers, while Pakistani female graduates are more than four times as likely to be unemployed. Where one in 20 white women have had to take a job below their qualification level, for women from ethnic minorities that figure is an astounding one in five. And despite high academic achievements, they face more discrimination - including lower pay and poorer prospects - and are likely to be found in a narrow range of low-paying industries, such as health, retail and social care.

In trying to work out how to combat this widespread and damaging discrimination, the report has sought the stories of some of the country's most successful black and ethnic minority women to see what obstacles they faced on the way to the top. One issue is educational expectations. Valerie Todd, a managing director of Transport for London, the body that runs London's transport system, says that when she was at school, teachers pushed her down a vocational route into nursing. Their view was, 'You need to become a nurse. That's what you do; what your people do.' Fortunately for me, my mother was as strong and determined as I am, and took me out of that school and put me in a college where I could do A-levels and they had high expectations of me. So I think there has been a problem, and probably still is, with educators."

Todd says she hasn't been aware of any racial discrimination in the course of her own career, but she has heard about other women having difficult experiences. "Women say they sometimes feel they are not given the same level of airtime, respect, and dignity that they see their white counterparts being given," she says. "There is a view that at times they are under- or over-managed. I think that there is still a perception that to get on in a work environment, you have to work long hours, you have to work twice as hard as your white counterparts, you have to deliver even more. Those myths need to be smashed."

One problem is that in talking about "ethnic minority women" there is an assumption that women from ethnic minorities are a homogenous mass, rather than very specific groups - as different from each other, of course, as they are from white women - and with different experiences. For instance, according to research quoted by the Fawcett Society, Pakistani, Bangladeshi and black Caribbean women tend, on average, to have children earlier than white women, at ages when they haven't had the time to shore up their careers. The society also highlights the fact that those of south Asian origin are more likely to have a larger number of children, while women of black Caribbean origin are more likely to be single parents.

According to the report, many ethnic minority women found they were in danger of being "typecast" into jobs where they specialised in gender or diversity issues. The other problem is "tokenism", with many women feeling that their colleagues suspect that they only got their jobs to fill a quota. "I don't like the approach of box-ticking - 'we need so many of this person, so many of that'," says Carol Lake, a managing director and co-head of marketing at JPMorgan, who was ranked in the top 10 of a list of the most powerful black women in the UK last year. "That means nothing if you're not going to value and embrace what it is that makes those people different."

With her current company, Lake says people's differences are seen as an advantage, but she has worked in places where it wasn't. "Before, I felt like I saw things in a different way and this can alienate you. It was informed, in part, by being in a minority. I was brought up by a white single parent, and I didn't feel in the centre of an all-embracing black community." Lake says that when she worked in the Caribbean, it was a very different environment. "I felt my contributions were being valued."

Irene Khan - the first woman, first Asian and first Muslim to become secretary general of Amnesty International - feels her ethnicity has caused others to question how well she can do her job. "It's a mix of ethnicity and gender together - whether you can perform in a leadership position, concern about whether I could show sufficient competence," she says. "I found it increasingly hard as I went up in my career and as I've gone up to lead an organisation, there have been more issues. There have been questions about whether I can be as balanced about human rights in some countries as opposed to others. I remember one journalist asked me whether because I was from Bangladesh, would I be as objective or as tough on human rights violations being committed in Muslim countries as in non-Muslim countries. I don't think they go around asking white people who are Christians whether they have a bias." She laughs. Khan says one of the barriers ethnic minority women face is presumptions about their competency. "But then the real issue is being supported in your work - to get training and peer support."

Todd agrees. "Organisations should have mentoring and coaching programmes to move women from ethnic minorities up through the ranks. And women need to become better at networking and raising their profile - which men tend to be very good at."

No one is pretending this is an issue with a quick-fix solution, though Harman clearly hopes her measures will speed things along. Butler says the priority is to win hearts and minds: she is not opposed to all-black shortlists, but she doesn't think they are practical. "But by raising the issue, you are raising awareness. Yesterday, I had an email from a young black woman. She said she wanted to study politics and that everyone had told her not to; that she would never get anywhere in that world. But then a lot of my teachers didn't have high expectations of me".